Inflation unlimited

At the moment, the federal government’s overriding concern must be to control inflation, mainly keeping it under six per cent. It crossed four-years high record in January, as per data by the Pakistan Bureau of Statistics, released on Friday.

This did not happen overnight, as in October last the inflation rate touched 6.78 per cent – and after a slight decline in November and December, it struck back with 7.2 per cent in January, fuelled by rupee depreciation and rising gas prices. At a time when crude oil prices have fallen in the world market, the government must be able to keep inflation at its projected rate of six per cent or even below. If it could be kept at 3.92 per cent in fiscal year of 2018 when rupee had started showing depreciation, and 4.16 per cent in 2017, when oil prices were quite high, it could be done now too. The recent State Bank of Pakistan’s monetary policy also serves a reminder of the bleak economic outlook with ever-increasing interest rates. The last key rate’s hike by 25 basis points took interest rate to 10.25 per cent, that increased interest rates by 4.50 per cent since January last year. The strict monetary policy, however, failed to combat the core inflation, mainly due to hefty domestic borrowing, which stands at bank-breaking figures of Rs7.6 trillion, the highest in the country’s history. PML-N economic wizards say when their term expired in May last year, domestic borrowing stood at Rs3.6 trillion. So, in five months, the government added a phenomenal Rs4 trillion to the tally. This is all happening despite bailout packages from friendly countries like Saudi Arabia, Gulf and China. The recent development is that the government has launched a sukook bond to generate funds from expatriates. China is again dispatching a cheque of $2.50 billion in loans that the finance ministry plans to keep in the State Bank to strengthen foreign reservoirs. The fresh cheque from China makes Chinese bills worth $4 billion altogether, issued in just a year. The government has secured commitments worth $14 billion from countries in the first six months of power. These commitments, partly realised and partly in the process, have least trickle down effects on the man on the street.

The economic slowdown and rising inflation charts have their worst impact on salaried, low-middle and poor classes. The impact is visible as almost all sectors are suffering from layoffs, salary delays and cuts. To add salt to their injuries, prices of food items, energy, medicines, and daily household items have gone up at 8.7 per cent year-on-year and 1.1 per cent on a monthly basis. Every sector blames the drop of rupee value for build-up of inflation. The National Price Monitoring Committee, however, also sees the recent increase in gas prices a culprit making inflation a big challenge. The government justifies the price hike citing ever increasing losses of utility companies. Measures like plugging leakage and controlling theft would have made utility companies profitable but the government took the easiest way of passing on the burden to consumers. True, the increase in gas bill has been pending since 2017, but the government chose an inappropriate time for the bill hike. Similarly, the drastic devaluation of the currency at a time when world economies were unstable turned out to be disastrous. The government at least can minimise the unavoidable impact of the rising inflation through strict price monitoring, discoursing cartels’ rule.

Before it takes price monitoring head-on, the government must be appreciated for some of its corrective measures. A subsidy-free Hajj regime, abolition of gifts and recreation funds for prime minister, governors and chief ministers and cut in ministers’ expenses will create a healthy model of governance. However, these measures will remain cosmetic steps if the overall economy is not overhauled. *